Increasing fuel price, increases poverty

The current high fuel price will have a direct impact on the cost of living and inflation in South Africa, due to the unfortunate reliance on road transport to move goods to and from markets, as food chains will inevitably pass these costs onto consumers. This will result in less disposable income, throttling those in already low income brackets. The Organisation Undoing Tax Abuse (OUTA) fears that these runaway fuel price increases will have ripple effects that will worsen unemployment and deepen poverty in SA.

It is extremely unfortunate that the cheaper transport option of rail has been lost to the nation as a result of Transnet’s inefficiencies and corruption over the past decade.

The two areas of direct impact available to our Government to correct our petrol price plight, is that of improving investor confidence and thereby strengthening the currency, along with a reduced reliance on fuel taxes and levies being passed on to the motorist.  Until these issues are addressed, we will continue to be at the mercy of the fluctuating oil price factor - with worse to come - that is currently impacting heaviest on our fuel price.

We urge the Government to start factoring in a decrease in the fuel levy and RAF in the coming budget plans. In addition, government needs to urgently develop a petroleum supply master plan with short, medium and long-term interventions to safeguard already cash-strapped South Africans.

Context: 

South Africa’s record fuel price of R17.08c per litre of 95 ULP (Inland) as of 3 October 2018 is the result of three main contributing factors, the first being the price of oil, the second is a weaker rand and thirdly, the internal taxes and levies applied by the Government.

The last time the price of oil was at the current level of close to $80 per barrel was four years ago in October 2014, however at that time the price of fuel was R13.61, due largely to a stronger rand at R11.18 to the USD. In addition, the combined Fuel Levy and Road Accident Fund (RAF) were a lot lower at R3.28 per litre, compared to R5.30 today.

South Africa’s weaker currency at an average of R14.69 to the US Dollar last month and the oil price at just under $80 per barrel, have both largely contributed to our record price of petrol.  Combine these factors with Government’s over zealous increases in Fuel Levy and the RAF by almost 60% in four years, and you have the perfect storm for high petrol prices not envisaged just one year ago, when we were grappling with the high prices of around R14 per litre.